April 28, 1998

The Secretary
Joint Standing Committee on Treaties
Parliament House
Canberra ACT 2600

Dear Senators,

I am writing on behalf of the Geelong Community Forum to express our serious concerns with the Multilateral Agreement on Investment which the government is now negotiating in party with other OECD nations. The MAI has the potential to threaten every gain which citizens, internationally, have made in the areas of human rights, labour and environmental standards. Given the seriousness of the treaty it is incredible to us that the MAI has not been a subject of national debate since it was first brought out of the Uruguay GATT rounds in 1995, into the OECD.

Among those groups which have been working within Geelong to bring the existence of the treaty to the attention of the public and politicians are included the Geelong Community Forum, Wainwright's Tree Environment Centre, The Geelong Environment Council, Geelong Trades Hall, The Centre for Citizenship and Human Rights (Deakin University) and the Geelong branch of the Progressive Labour Party. The general experience of these groups has been that politicians at local, state and federal level were almost all completely ignorant of the treaty's existence before community groups and other organisations brought it to their attention. Despite heavy lobbying and petitioning by community groups and individuals, there is no evidence to suggest that our concerns have been brought back to Parliament or to the Joint Senate Standing Committee on treaties, by any of these 'representatives'.

The level of secrecy, ignorance and apathy at the political level which is surrounding the negotiation of the MAI is compromising the ability of the wider public to influence the political process through informed debate. As an example, approximately 20 people in the local area sent to Treasurer Costello in February for a copy of the draft text of the MAI and Australia's proposed reservations. Not one of those people have received this information; we have been forced to download the draft text from the internet.

As evidence of the high level of community concern, I am enclosing an extract of some of the material which one of our members used to lobby our local council. I am also enclosing several reports on the treaty which have been carried in the local press.

It is the position of the Geelong Community Forum that the negotiations on the MAI be immediately STOPPED pending full and frank public disclosure of the implications of the treaty.

While the Geelong Community Forum has been principally involved with public education about the existence of the MAI, we would also like to represent our members on a number of specific points contained in the treaty.

THE MAI COMPROMISES GOVERNMENT AUTONOMY

When nation states sign on to the treaty they are bound by its terms for a period of 5 years, while investors who have entered the region during that time are guaranteed entry conditions for a further 15 years. Should there be a change in the government during this time, they would be unable to quickly retreat from the provisions of the treaty. The requirement to successively 'roll back' reservations, or as is expressed in the French draft of the text, the 'dismantlement' of the reservations, would mean that even the limited protection accorded to sensitive investments would be threatened. Similarly the 'stand still' conditions in the treaty would make it impossible for subsequent governments to add to Australia's reservation list. In our opinion, this amounts to giving away the right of governments to legislate in the interests of their electorates.

THE DOMESTIC TREATMENT RULE DISCRIMINATES AGAINST LOCAL INVESTORS

The requirement that multinationals receive domestic treatment when they invest will discriminate against local investors who may not have the same economic power as multinational companies. Economies of scale have the potential to obliterate local companies and especially small business. In addition, any subsidies which the government aimed at facilitating small business could be claimed by multinationals on the grounds of domestic treatment. The domestic treatment clauses overlook the fact that the Australian taxpayers have for generations funded the kinds of infrastructure which makes industry efficient and profitable, such as roads, airports and telecommunications. Yet there is no provision within the treaty which would guarantee that multinational companies would contribute to infrastructure costs, or compensate the Australian public for using the existing infrastructure. Multinational companies will be effectively subsidised by Australian taxpayers and domestic industry, augmenting their already existing ability to minimise taxation.

THE THREAT TO ORGANISED LABOUR

In the past it has been the practice of multinational companies to play off peripheral zones in the world in order to find countries willing to provide the highest tax breaks with the lowest costs of labour. If countries were unwilling to compromise their labour or environmental standards the multinational company simply threatened to move away. Because there are no performance requirements built into the MAI it will be possible for multinational companies to exploit labour in OECD countries just as easily as they have exploited labour in the Third World. Recent trends in international investment have seen a move toward keeping points of production close to their markets, with the possibility of fast retooling in the event of commodity fluctuations. The MAI will allow multinational companies the opportunity to take advantage of this trend because it will be possible for them to set their own standards for the employment of local labour while taking advantage of the excellent infrastructure and high-demand domestic markets which are available in the OECD countries.

Whole work forces, and in particular, unionised labour, could be displaced by underpaid and poorly protected workers. It is even possible that the MAI may override immigration laws, as requiring the use of local labour is a performance requirement which would be illegal under the treaty. For example, we could see the Geelong and Broadmeadows Ford factories filled with low-paid Mexican workers. If the government attempted to force the use of local labour, they could be sued under the treaty's expropriation and compensation rules. If they government attempted to subsidise local labour, for example women or minority groups, the multinational company could demand that their work force is also subsidised under domestic treatment rules.

SOCIAL AND ENVIRONMENTAL COSTS OF THE MAI

The rational economists who are drafting the treaty are working under the presumption that the economic environment is somehow encapsulated and separate from the social, political and environmental realms. They consider people to be little more than 'human capital' which can be rationally shifted around from work place to work place, anywhere in the world despite the kinds of social dislocations this can cause. The primary loyalty which multinational companies hold is toward their shareholders and not to communities or workers. Anything which blocks the free flow of capital is an anathema to these companies, including the political process itself. While it is the charter of multinational companies to maximise profits, it is surely the charter of governments to protect the interests of their communities, including those interests which transcend the purely economic. The expropriation and compensation rules within the treaty severely threaten the possibility of governments to exercise their political power in the service of balancing the competing needs of the economy, the environment and society in general.

This is dramatically shown by the case of US Ethyl Corporation which is suing the Canadian government under the much more limited expropriation provisions in NAFTA, for the sum of US $251 million. The Canadian government banned the petroleum additive, MMT because it was a suspected neurotoxin which damages the pollution systems in cars. The Ethyl corporation bypassed the dispute resolution provisions within NAFTA and filed a direct expropriation suit against the government with the claim that the act of debating an MMT ban constituted an expropriation of the company's assets.

This case, which has become emblematic within the citizen's campaign across the world, demonstrates the dangers of allowing corporations absolute autonomy in the economic realm without regard for the equally legitimate claims of social and environmental well-being.

DEMANDS OF THE INTERNATIONAL CITIZEN'S CAMPAIGN

The Geelong Community Forum is joining with over 600 other citizens groups world-wide to demand that the OECD and its member countries take the following actions:

1. Immediately suspend negotiations, and undertake, with meaningful public input and participation, an independent and comprehensive assessment of the social, environmental and development impact of the MAI.

2. Require, in any final investment agreement, that multinational investors be made to observe binding agreements incorporating environment, labour, health, safety and human rights standards to ensure that they do not use the MAI to exploit weak regulatory regimes.

3. Eliminate the investor/state dispute resolution mechanism and put into place democratic and transparent mechanisms that ensure the civil society, including local and indigenous peoples, gain new powers to hold investors accountable.

4. Eliminate the MAI's expropriation provision so that investors are not granted compensation for a vague, broad notion of regulatory takings. Governments must ensure that they do not have to pay for the right to set environmental, labour, health and safety standards, even if compliance with such regulations imposes significant financial obligations on investors.

5. Open the negotiation process to citizens, which will require, among other things, timely public release of draft texts and country positions and the scheduling of open public meetings and hearings in member and nonmember countries.

6. Broaden government representation at negotiations beyond state, commerce and finance agencies to a broader range of government (and non-government) agencies, ministries and parliamentary committees. (For instance, health, education, economic development, women's, labour, and environmental agencies and ministries.)

7. Make provisions for a country's rapid withdrawal from the MAI when it deems this to be in the best interest of its citizens. (Source: 'MAI: Democracy for Sale?' Apex Press, 1998, pp.9-10).

CONCLUSION

The Geelong Community Forum shares the concerns of citizenship groups across the world that the MAI forms an unprecedented threat to the environment, to organised labour and to human rights provisions. We would like to remind the Joint Senate Standing Committee and the Parliament that if this treaty is signed in its current form it will cause severe social, environmental and economic disruption for generations of Australians, many of whom are not yet of voting age. We urge you to protect the democratic rights of current and future generations of Australian citizens by recommending to the government that they refuse to sign this disastrous treaty.

Yours sincerely,

Serena O'Meley
Geelong Community Forum